Economy Current Affairs

United Kingdom in historic referendum votes to exit European Union

People of United Kingdom (UK) in a historic Brexit referendum have voted in favour of leaving European Union (EU).

In the Brexit referendum, the ‘Leave’ side won decisively by securing 51.9% of the total votes overturning ‘Remain’ side which secured 48.1% votes.

This is the second referendum on UK’s relationship with the EU. In 1975, in a referendum on whether the UK should stay or leave the EU, the country voted for staying with 67.2% votes.

After results were declared UK Prime Minister David Cameron, the architect of the referendum and a passionate supporter of UK within the EU, announced stepping down as Prime Minister in October 2016.

What now?

The vote to leave the EU now has triggered a two-year ‘withdrawal process’ which will determine the future of UK’s relationship with the EU. At the end of withdrawal process, UK exits the single market, then EU countries will start imposing tariffs on British products.

Why UK wants to leave the EU?

  • Many in the UK think that the EU has transformed a lot over the years.
  • Since formation of EU, several countries have joined it and UK thinks that since then EU’s hold over everyday aspects of these countries has increased.
  • Many think that Britain is shelling out billions of pounds every year in the form of EU fees without much gain in return.
  • UK also thinks that EU’s some constraints have imposed many opposing rules on Britain’s business.

What does UK’s exit means?

  • Henceforth UK will be able to secure independent trade deals with important countries such as India, China and US.
  • Thus, it can have a stronger influence for free trade and cooperation with other countries as in EU it was having independent influence.
  • Now it will have control over wide areas like employment, health, law and safety and immigration policies.
  • UK can also save billions of EU fees and use it for scientific researches and for building new industries.

What critics believe?

  • By leaving EU, UK would not be able to obtain better trade terms with other countries. It would face problems with different regulations of EU.
  • Leaving EU will not help UK to reduce immigration as countries that trade with EU from outside have higher rated of immigration, including from EU countries.
  • Other EU members may call for independent protectionism and ultra-nationalism which in recent times is getting hardened across the world.

Impact on India

  • UK’s exit from the EU will affect the flow of FDI (Foreign Direct Investment) in India over the short-medium term and the long term periods.
  • In short-medium term period FDI may decrease temporarily and potentially led to financial instability and a legal regime overhaul. In the long-term FDI may fall.
  • Many Indian information technology (IT) companies based in the UK with large work forces that offer services to Europe Union member countries will be hit.

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Union Cabinet approves establishment of Fund of Funds for Startups under SIDBI

The Union Cabinet has approved setting up of Fund of Funds for Startups (FFS) under Small Industries Development Bank of India (SIDBI) for extending support to Startups.

This 10,000 rupees corpus fund will be established in line with the Start up India Action Plan, an initiative of Department of Industrial Policy & Promotion (DIPP) which was unveiled by Union Government in January 2016.

Key Facts

  • The FFS will be used for the contribution of various Alternative Investment Funds (AIF) registered with Securities and Exchange Board of India (SEBI) to extend funding support to Startups.
  • Allocation of Resources: It will be built up over the 14th (2015-2020) and 15th (2020-2025) Finance Commission cycle. However it will be subject to progress of the scheme and availability of funds.
  • An amount of 500 crore rupees already has been provided to the corpus of FFS in the fiscal 2015-16 and 600 crore rupees has been earmarked in the fiscal 2016-17.
  • Further provisions will be made as grant assistance through Gross Budgetary Support by DIPP which will monitor and review performance in line with the action plan.
  • Execution and Monitoring: The day to day operations of the FFS will be managed by the expertise of SIDBI.
  • The monitoring and review of performance of startups would be linked to the implementation of the action plan to enable execution as per timelines and milestones.
  • Potential of FFS: The corpus fund can be the nucleus for catalyzing 60,000 crore rupees of equity investment and twice as much debt investment.
  • It would provide a predictable and stable source of funding for the start-up enterprises and thereby facilitate large scale job creation.

Comment

  • The FFS will play an important role in accelerating innovation driven entrepreneurship and business creation through Start-ups which is crucial for large-scale employment generation in the country to tap the demographic dividend.
  • The Fund of Funds operations will help to address the various challenges faced by start-ups such as limited availability of domestic risk capital, information asymmetry, constraints of conventional bank finance and lack of hand holding support from credible agencies.
  • The Fund would also encourage greater participation of private capital and thus help leverage mobilization of larger resources to build highly scalable businesses from startups.

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Ken Miyauchi appointed as President and COO of SoftBank Group

Ken Miyauchi has been appointed as the President and Chief Operating Officer (COO) of the Japanese conglomerate SoftBank Group.

He will succeed Nikesh Arora who had stepped down from his position after the Chairman and CEO of Group Masayoshi Son wanted to remain at the helm longer than first planned.

Prior to this appointment, Ken Miyauchi was head of the SoftBank group’s Japanese telecommunications operations. He has been working with the SoftBank Group since October 1984.

About SoftBank

  • SoftBank Group is a Japanese multinational telecommunications and Internet corporation established in 1981 in Tokyo.
  • It has operations in fixed-line telecommunications, broadband, Internet, e-commerce, technology services, media, finance and marketing, and other businesses.
  • As of 2015, the group is the 62nd largest company in the world based on a composite of sales, assets, profit and market value.

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